Working Paper: NBER ID: w25762
Authors: Aaditya Mattoo; Robert W. Staiger
Abstract: How should economists interpret current trade wars and the recent U.S. trade actions that have initiated them? In this paper we offer an interpretation of current U.S. trade actions that is at once more charitable and less forgiving than that typically offered by economic commentators. More charitable, because we argue that it is possible to see a logic to these actions: the United States is initiating a change from “rules-based” to “power-based” tariff bargaining and is selecting countries with which it runs bilateral trade deficits as the most suitable targets of its bargaining tariffs. Less forgiving, because the main costs of these trade tactics cannot be avoided even if they happen to “work” and deliver lower tariffs. Rather, we show that the main costs will arise from the use of the tactics themselves, and from the damage done by those tactics to the rules-based multilateral trading system and the longer-term interests of the United States and the rest of the world.
Keywords: Trade Wars; Tariff Bargaining; Multilateral Trading System
JEL Codes: F02; F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| US's strategic choices in tariff imposition (F13) | shift from rules-based to power-based tariff bargaining system (F13) |
| employing trade tactics (F19) | negative outcomes for the multilateral trading system (F13) |